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A company’s normal selling price for its product is $29 per unit. However, due to market...

A company’s normal selling price for its product is $29 per unit. However, due to market competition, the selling price has fallen to $24 per unit. This company's current inventory consists of 290 units purchased at $25 per unit. Replacement cost has fallen to $22 per unit. Calculate the value of this company's inventory at the lower of cost or market.
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Normal selling price- $29 per unit Fallen selling price = $24 per unit Inventory 290 units Purchasing cost $25 per unit Replacement cost $22 per unit As the selling price has fallen lower than the purchasing price of the inventory, therefore, the purchasing price has become irrelevant here to calculate the value of the inventory. The replacement cost would be used to calculate the value of the inventory now. The value of the inventory would be lower of the cost or the market value. CostinvoNumber of units x Replacement cost OSInventory = 290 units × $22 per unit =|$6,380 Market value = Number ofunits × Selling price Fallen selling price 290 units × $24 per unit - $6,960 Therefore, the value of companys inventory at lower of cost is S6,380, and market value is higher than the cost that is S6,960 Therefore, the correct answer is $6, 380

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Answer #1
Particulars Amount
Number of units                     290.00
Cost per unit                       25.00
Total cost                   7,250.00
Number of units                     290.00
Market price                       22.00
Market Value                 6,380.00
Thus lower is market value which is $6,380 .
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